Meera Operates Ducks Unlimited, Which Raises Mallard Ducks to Sell

question 94

Multiple Choice

Meera operates Ducks Unlimited, which raises mallard ducks to sell to dog food companies. Meera leases the land for $5,000 per month and hires workers at $1,000 per worker per month. With 0 workers, the total cost is $____.

• A) 6,000
• B) 5,000
• C) 4,000
• D) 1,000

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Definitions:

Financial Leverage

The use of borrowed funds to increase the potential return on investment, amplifying both potential gains and losses.

Fixed Cash Outflows

Regular, set payments made by a business, such as rent, salary payments, and loan repayments.

Operating Leverage

An indicator of how increases in revenue lead to rises in operational profit, reflecting the company's balance of fixed to variable expenses.

Fixed Costs

Expenses that do not vary with production level or sales volume, such as rent, salaries, and insurance premiums.